Mallya may go for total majority in Deccan

MUMBAI: UB Group could strengthen its position in Air Deccan by raising its stake in the low cost carrier to 51% in the next few months—making the price warrior a subsidiary company of the group.

The Bangalore-based liquor conglomerate, which runs Kingfisher Airlines, bought a 26% stake in Air Deccan in early June and is on schedule to make an open offer for 20% more that opens next week. Besides this, sources say, other investors are willing to sell about 4-5% stake, taking the UB group holding up to 51%.

The open offer price of Rs 155 is Rs 14 higher than the Deccan Aviation stock price on Friday. The stock has been rising since the two firms shook hands to clinch the deal, and it is widely expected that the alliance will help the airline cut losses.

An absolute majority will enable the Kingfisher group to take major decisions to synergise operations of the two carriers. Airline sources said, one of the major decisions is expected to be in respect to whether the Air Deccan brand will be retained for future operations.

Asked about it, Kingfisher chairman Vijay Mallya said a decision on the issue will be taken only after a formal market evaluation. Kingfisher is in the process of commissioning a market study on the value of the Air Deccan brand in terms of the customer perception in various parts of the country.

"Our liquor business is all about brands and we have a good understanding of their value. We wouldn't like to go in for a re-branding if there is value in the existing brand," Mr Mallya said. The airline industry has been abuzz with rumours for the past fortnight that Air Deccan will be rebranded as Kingstar of KingAir.

Air Deccan chairman GR Gopinath dismisses any talk about re-branding of Air Deccan. Speaking to ET, he said, "The Air Deccan brand is synonymous with low-cost travel in India."

Captain Gopinath said the joint marketing campaigns to drive home the strengths of the Kingfisher-Air Deccan group would continue, he said. "We would like to impress on air travellers the advantages they get while flying the Kingfisher-Air Deccan combo," he added.

Earlier this month, the group unleashed a 'King Power' campaign in newspapers and hoardings all over the country. The branding focuses on the combined strength of the two airlines in terms of their common network and reach.

The colours used were Kingfisher's bold red and white with no trace of Air Deccan's blue and yellow.

Industry analysts feel that the Air Deccan has substantial brand equity in smaller towns and cities across the country, given its connectivity to 65 destinations across the country—majority in Tier II and III cities—with over 350 flights a day.

Currently teams from both Air Deccan and Kingfisher are constantly looking at ways to reduce operating costs through sharing of resources and getting better bargains from suppliers. "We have gained significant discounts on insurance payouts due to our joint approach," the Air Deccan chief said.

Similarly, talks with other suppliers are also on to get a better deal. Re-scheduling of routes is the other priority of area for both the teams, he added. The Kingfisher-Air Deccan group currently has a fleet of 71 aircraft, including 41 Airbus aircraft and 30 ATR aircraft. The group offers about 537 daily flights, connecting 69 cities.